CRA released a letter which discusses whether a member of a not-for-profit corporation without share capital is a “shareholder” within the meaning of that term in subsection 248(1) for purposes of subsection 15(1) of the Income Tax Act. CRA’s view was that members of a non-profit corporation without share capital, in this case a family recreational club, will be considered shareholders thereof for purposes of subsection 15(1) of the Act, notwithstanding that they are not entitled to receive dividends.
CRA stated the following:
“...as indicated in our technical interpretation 2011-0415831E5 dated November 17, 2011, the CRA has adopted the interpretation that “a member of a society incorporated or continued under the Canada Not-for-profit Corporations Act, under Part II of the Canada Corporations Act, under a provincial societies Act or equivalent provincial legislation would generally be considered a shareholder under subsection 248(1), and therefore subject to the application of subsection 15(1) of the Act, notwithstanding that the society or corporation is prohibited from paying dividends to its members.”
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.